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INSURANCE FOR PCB YIELD & QUALITY LOSSES
What is Yield Loss, Scrap & Rework Risk in PCB Manufacturing?
In PCB manufacturing, yield is the proportion of boards that pass specification and can be shipped without rework. When yield drops, the business impact is immediate: raw materials and work in progress are written off, production time is consumed by investigation and rework, delivery dates slip, and quality teams face pressure from customers who need proof and traceability.
Scrap and rework are not always the result of a single dramatic event. They can be driven by process drift, contamination, equipment breakdown, chemistry imbalance, power issues, data errors, handling damage, or last-minute design/specification changes. And because the cost is often “internal” (lost materials + lost time), PCB businesses can underestimate how quickly these losses can become a cashflow problem.
Insurance doesn’t replace good process control — but it can help protect you when yield loss is triggered by insured events (for example smoke contamination, escape of water, or sudden equipment breakdown where covered), and it can help protect you against third-party claims when a defect causes damage or triggers field action. The key is structuring the programme so it matches how yield losses actually arise in the PCB sector.
Why PCB Yield Losses Become Expensive (Fast)
Yield loss feels like a “quality issue”, but the financial impact is broader. Scrap consumes materials and labour already invested. Rework consumes capacity that should have been producing new orders. When delivery dates slip, you may face expedited shipping, emergency outsourcing, overtime, and contractual pressure. If the affected boards have already shipped, the exposure can move from internal cost to a customer dispute, potential recall/rectification and reputational damage.
The most difficult yield losses are those that are intermittent or hard to diagnose: plating voids, insulation resistance failures, adhesion issues, micro-cracking, contamination residues, dimensional stability problems, or test anomalies that appear only after thermal cycling or assembly. These events tend to broaden the scope of investigation and can “freeze” production while root cause is established — which makes business interruption planning important.
Direct Costs (Internal Loss)
- Scrap of laminates, films, chemicals, panels and part-processed boards (WIP)
- Lost labour time and machine time already invested in the scrapped batches
- Rework labour, repeat imaging, re-plating, re-test, re-inspection
- Repeat clean-down and validation, especially after suspected contamination
- Overtime and shift changes to recover delivery dates
Indirect Costs (Commercial Impact)
- Late delivery penalties or loss of preferred supplier status
- Expedited freight and emergency outsourcing to protect milestones
- Customer audit pressure, extra reporting and traceability demands
- Downstream liability if defects damage third-party property
- Field action/rectification costs where boards must be replaced quickly
How Insurance Typically Responds to Scrap & Rework Losses
The critical point is that standard insurance is not designed to pay for routine scrap. Insurers generally respond to sudden, unforeseen events and defined causes of loss. Yield loss is often a symptom, not a cause — and the insurer will focus on the trigger. That said, PCB manufacturers can still structure insurance that meaningfully reduces the financial shock of major yield events, especially when linked to insured perils or when defects create third-party claims.
In practice, yield loss protection is usually created by a combination of: property cover (including smoke/water damage), stock and WIP definitions, equipment breakdown (if arranged), business interruption, and liability covers (public/product, plus optional rectification/recall and professional indemnity where relevant).
Where Insurance Commonly Helps
- Sudden insured events cause stock/WIP damage (fire/smoke, escape of water, storm)
- Contamination from an insured event renders WIP or materials unusable
- Equipment breakdown causes physical damage and production stops (where cover applies)
- Business interruption protects profit during downtime after insured events
- Liability claims for third-party injury/property damage caused by defective boards
- Rectification/recall can fund field replacement activity (if arranged; wording dependent)
Where Insurance Often Won’t Help (Common Misunderstandings)
- Gradual process drift, wear and tear, or predictable yield variability
- Known defects continuing after discovery, or failure to take reasonable mitigation steps
- Pure contractual penalties and liquidated damages (unless specifically covered)
- Replacing your own products under standard product liability (often needs recall/rectification)
- Pure financial loss claims without injury or property damage (usually PI, not PL)
- Design/spec errors where you provide advice (often needs professional indemnity)
The goal is not to “insure everyday scrap”. The goal is to protect you against the high-severity events that look like yield loss but are actually rooted in insured perils, insured breakdowns, or third-party liability outcomes. Insure24 helps position the risk to underwriters so policy descriptions and definitions match your real exposures.
Common Root Causes of PCB Yield Loss (What Underwriters Focus On)
Insurers want to understand whether yield losses are likely to be sporadic, containable events or systemic issues. The difference matters because it changes the likely severity and the predictability of future losses. When your submission explains your controls clearly, underwriters can price more confidently and may offer better terms.
Below are common yield loss drivers in PCB facilities and why they matter from an insurance perspective. This is not an exhaustive manufacturing guide — it’s a risk lens: the aim is to show where losses can concentrate.
Process & Chemistry Drivers
- Plating chemistry imbalance causing voids, thin copper or adhesion problems
- Etch control issues leading to under/over-etch and dimensional failures
- Residue/cleaning failures causing insulation resistance or solderability issues
- Lamination errors causing delamination, measling, or CAF-related vulnerability
- Mis-registration, imaging defects, or drill accuracy problems
- Solder mask cure/process deviation causing rework and cosmetic rejects
Equipment, Environment & Handling Drivers
- Sudden machine failures (drill/laser, imaging, plating line, AOI, test)
- Power quality events causing process interruption or data corruption
- Smoke/soot contamination, water ingress, humidity spikes affecting materials
- ESD/handling issues damaging panels or causing latent defects
- Compressed air contamination (oil/water) impacting sensitive processes
- Contractor works generating dust fibres and contamination transfer
Yield losses often combine multiple factors: a small equipment fault triggers a chemistry drift, which creates contamination, which creates rework and delays. Your insurance programme should reflect those cascading loss patterns — particularly the parts that generate large, sudden financial impact (stock/WIP damage, downtime, and third-party claims).
Building Blocks of Insurance for Yield Loss & Rework Exposure
The most effective approach is to structure cover so it responds to the “big moments”: sudden insured events that damage stock/WIP or facilities, breakdown events that stop production, and downstream liability disputes. The right mix depends on whether you are prototype/high-mix or volume production, the customer sectors you supply, and how much engineering input you provide.
Below is a practical guide to the cover sections commonly used by PCB manufacturers to reduce yield-loss severity.
Property, Stock & WIP (Where Yield Loss Becomes a Claim)
- Stock definitions that include raw materials, WIP and finished goods
- Smoke and water damage treatment suitable for sensitive manufacturing
- Accurate sums insured to avoid average clause reductions
- Customer-owned goods cover if you hold customer materials/prototypes
- Specialist cleaning and restoration considerations after incidents
This is where contamination-linked yield losses can become insured losses: if an insured peril renders your WIP or materials unusable, the policy needs the right definitions and values to respond.
Downtime & Continuity (Business Interruption)
- BI indemnity period aligned to realistic recovery and re-qualification time
- Increased cost of working to fund outsourcing, overtime and expedited freight
- Claims preparation support and documentation costs
- Supplier dependency consideration where materials lead times are long
- Cyber BI consideration where IT/OT outages can stop releases and traceability
Even when the physical loss is containable, downtime and re-qualification can create the biggest cashflow shock. BI is designed for that.
Equipment Breakdown (Where Arranged)
- Sudden mechanical/electrical failure protection for critical machinery
- Coverage for repair/replacement and associated costs (subject to terms)
- Optional BI extensions that follow breakdown events (availability varies)
- Support for “single point of failure” equipment dependency
- Focus on maintenance records and spares strategy for better terms
Many yield shocks start with machine failure: imaging drift, drill issues, plating line faults, test failures. Breakdown cover can help where the event is sudden and causes physical damage.
Liability & Dispute Covers
- Public & product liability for injury/property damage claims caused by your products
- Rectification/recall for field action and replacement costs (if arranged; wording dependent)
- Professional indemnity if you provide design/DFM/spec advice and face financial loss allegations
- Contract alignment (limits, territories, consequential loss language)
- Legal defence focus — disputes are expensive even when you are not at fault
The insurance “story” changes once boards ship. At that point, the exposure may be a liability claim or a rectification event, not a property/stock loss.
PCB Yield Loss Claim Examples (How Events Typically Play Out)
The examples below show typical “yield loss” stories and where different covers may apply. They also illustrate why correct policy descriptions and definitions matter: insurers want clarity on processes, values and controls.
Example 1: Smoke Contamination & WIP Spoilage
A fire incident (including a nearby fire or internal incident) creates smoke and soot ingress. Machines are not destroyed, but controlled areas and panels in process are contaminated. Quality cannot certify them, and a large batch of WIP must be scrapped.
- Typical cover: Property/stock/WIP (insured peril), specialist cleaning; BI for downtime
- Key issue: Whether smoke contamination is treated as physical damage and whether WIP is correctly defined
- Common gap: Underdeclared peak WIP values causing average clause reductions
Example 2: Escape of Water & Material Damage
A leak damages laminates, films and part-processed boards. Materials absorb moisture or are physically damaged. Production stops while areas are dried, cleaned and revalidated.
- Typical cover: Stock/WIP under property policy; BI after insured peril
- Key issue: Water damage deductible/sub-limits and how materials are valued
- Common gap: BI indemnity period too short for re-qualification and restart
Example 3: Equipment Breakdown Triggers Yield Collapse
A critical machine suffers sudden failure. Work continues temporarily, but output quality deteriorates and yields collapse. Investigation shows the failure created a process deviation that produced an out-of-tolerance batch.
- Typical cover: Equipment breakdown (if arranged) for damage; BI extension if included
- Key issue: Whether the event meets the definition of breakdown and physical damage
- Common gap: Assuming breakdown cover pays for all scrap regardless of trigger/wording
Example 4: Shipped Defect Leads to Customer Claim
Boards pass factory test but fail during customer assembly or in-service, causing damage to third-party equipment. The customer alleges the PCB defect created the loss and demands compensation and replacement.
- Typical cover: Product liability for third-party damage; optional rectification/recall for replacements (if arranged)
- Key issue: Whether there is property damage/injury vs pure financial loss
- Common gap: No PI cover where dispute is framed as negligent advice/spec input
Yield Loss Submission Checklist (What Insurers Need to Quote Confidently)
Underwriters don’t expect “perfect yield” — they expect credible controls and clear visibility. A good submission helps insurers understand your maximum loss scenario and how you keep yield issues contained. This often produces faster quotes and better terms.
Operations, Products & Customers
- Turnover and customer sector split (industrial, automotive, medical, defence, etc.)
- Prototype/high-mix vs volume production profile and maximum batch sizes
- Key processes: plating, lamination, imaging, drilling/laser, solder mask, surface finish, test
- Quality systems, traceability and change control procedures
- Contract requirements: limits, territories, indemnities, and any “fitness for purpose” language
Values, Dependency & Controls
- Declared values for plant/equipment, contents, stock and peak stock/WIP
- Single points of failure equipment and maintenance approach
- Environmental controls: filtration, humidity, clean areas and segregation
- Fire protection, housekeeping, water-leak controls and contractor management
- Cyber controls for IT/OT dependency (MFA, backups, patching, remote access controls)
A single contamination incident created a cascade of scrap, rework and delivery pressure. Insure24 helped us restructure our stock/WIP and BI values, and made sure the insurer understood our maximum exposure — the renewal process became far smoother and the cover was clearer.
Finance Director, UK PCB ManufacturerFREQUENTLY ASKED QUESTIONS
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Can I insure routine scrap and rework?
Usually not. Standard insurance is designed for sudden, unforeseen insured events rather than day-to-day quality variation.
However, you can structure cover so that when an insured peril (such as fire/smoke or escape of water) damages stock/WIP or controlled areas,
and creates large yield losses, the policy can respond — subject to wording and values.
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Does product liability cover replacing faulty PCB batches?
Typically product liability focuses on third-party injury or third-party property damage caused by your product.
The cost to replace your own products and run field actions is often addressed by specialist rectification/recall cover (if arranged),
subject to policy terms and definitions.
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What’s the most common insurance gap for yield-loss events?
Underinsurance and unclear definitions. If peak stock/WIP values aren’t declared, average clause can reduce claims.
And if WIP is not clearly included, insurers may treat part-processed boards differently. Clear definitions and realistic declared values are crucial.
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Could equipment breakdown insurance help with yield collapse?
It can, where a sudden breakdown causes physical damage and the policy is arranged to cover that machinery (and, where available, BI extensions).
It does not automatically pay for all scrap. The trigger, definitions and scope of cover determine the response.
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How should I set BI for a yield-loss related shutdown?
BI should be set around your realistic recovery timeline after insured events — including cleaning, repairs, re-qualification and customer sign-off.
Many manufacturers choose 12 months by default, but longer periods may be appropriate where equipment lead times and revalidation are significant.
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How quickly can Insure24 arrange cover?
Many PCB risks can be quoted quickly once values, processes and customer exposure are clear. More complex risks, higher limits or specialist hazards
may require underwriter review. As a guide, allow 1–2 business days once core information is provided.
UNIQUE INSURANCE
TAILORED FOR YOU
Yield loss can look like a “quality issue”, but it often becomes a major financial event when it is triggered by insured perils, breakdowns or downstream disputes. Speak to Insure24 to structure cover around stock/WIP exposure, process dependency and realistic recovery timelines — and to align liability cover with your customer contracts.
PROTECT YOURSELF
- Stock and WIP definitions aligned to PCB processes
- Contamination and insured-peril scenarios structured correctly
- Business interruption designed for clean-up and re-qualification time
- Options for equipment breakdown and critical machine dependency
- Liability alignment for downstream disputes and field actions